Call it a muted budget bounce, or a rebound because of improving market conditions, but the small recovery in consumer confidence won’t go down a treat at the Reserve Bank this morning.

The Westpac/Melbourne Institute Consumer Sentiment survey’s index rose 2.7% from April to 89.8, the first increase this year. It was the fourth consecutive reading below 100, which shows pessimists still outnumber optimists, something the RBA and its lever pullers will want to see.

It could have been the impact of the budget last week and the tax cuts but Westpac’s head of Economics, Bill Evans said that, “The modest bounce in confidence is somewhat disappointing, and there are clear signs the economy is slowing.”

“Interest rates are currently poised on a knife edge. The central bank’s patience with high inflation will be sorely tested over the next six months, and prospects for rates will be driven by the extent of the slowdown in the economy.”

The confidence survey was conducted between May 13 and May 18. The budget was on May 13, so the survey took in the actual announcement and much of the reaction, including Brendan Nelson’s plan to cut petrol by 5 cents a litre and block the higher excise on alcopops.

But the RBA’s release of its May 6 minutes yesterday, with the news that the board spent “considerable time” at its May meeting debating whether to raise interest rates again, has changed the way all major economic data will now be viewed.

Before yesterday it was against a policy backdrop of the bank on hold so far as interest rates are concerned: now it’s the bank reaching for the lever to put rates up to at least 7.5% for the cash rate, if there’s an outbreak of optimism, or inflation isn’t slowed by sluggish demand from consumers and business.

That’s why a rise in Westpac’s index measuring of whether now is a good time to buy a major household item won’t be good news at the RBA: it rose 18.4% this month, that’s a big rise, though it is still 40.2% down on May of last year.

Better for the RBA was news that the index measuring the outlook for family finances over the next 12 months dropped 10.9%, despite the tax cuts in the budget.

The RBA will also note the announcement from small women’s fashionwear retailer, Noni B which said this morning that it sees full year profit falling from the previous year.

Noni B sees net profit coming in between $6 million and $6.7 million, down from $8.3 million in 2007, a drop of upwards of 25%. “Total sales are ahead of the same period of financial year 2007, and reports from shopping centres indicate that the company’s stores are increasing their share of the current weak apparel market,” it said.

Offsetting that will be news from the Australian Bureau of Agricultural and Resource Economics that resources groups plan a 62% boost in the value of spending on new projects in 2008-09. Mining and energy companies are developing a record $70.5 billion of new projects in Australia to meet growing foreign demand for metals and energy.

ABARE said the $70.5 billion reflects 97 advanced projects, defined as being under construction or committed to. Since October 2007, 58 new projects have been added to the list and 22 projects have been completed.